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IT major Tata Consultancy Services has appealed to the Board of Approval (BoA) for Special Economic Zones against tax-breaks denied to it by a lower-level committee for a host of services, including travel agent’s services and convention services used by its IT/ITeS units.
“The appeal will be examined by the BoA in its meeting on August 30. The Finance Ministry does not favour extension of tax exemption for services consumed by units in SEZs, but we will see what can be done,” a Commerce Department official told Business Line .
Inclusion of services
TCS had applied for inclusion of a number of services as services required for authorised operations in its three IT/ITeS units located in two SEZs in Hyderabad.
These include air travel agent services, convention services, rail travel agent’s services, rent-a-cab scheme operator’s services and travel agent’s services.
The request was, however, rejected by the Unit Approval Committee for SEZs that deals with approvals to units at the zone level. An SEZ unit can get tax exemption only for services and operations that are notified as authorised by the Government.
In its submission to the BoA, which is headed by the Commerce Secretary and has officials from various Finance Ministry departments as its members, TCS pointed out that the UAC erred in not approving the above services as services required for authorised operation of SEZ.
“Rejection of services is against the SEZ scheme that amounts to export of tax which is against the policy of the Government.” TCS said in its representation.
Service tax exemption
For an IT company, exemption from service taxes of 12.36 per cent for travel-related services is a considerable relief as travelling expenses of their employees is a substantial part of their operational costs, pointed out Hitender Mehta, an SEZ consultant and co-chairman of Assocham’s National SEZ Council.
“This is an on-going dispute between the Government and SEZs. While SEZs want exemption for all services consumed by the unit, irrespective of whether it is consumed inside the zone or outside, the Finance Ministry wants to restrict it to those consumed inside,” Mehta said.
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